Eaton Corp plc (ETN)·Q1 2025 Earnings Summary

Executive Summary

• Record Q1 2025 results: revenue $6.377B (+7% YoY), diluted EPS $2.45 (+20% YoY), adjusted EPS $2.72 (+13% YoY), segment margin 23.9% (+80 bps YoY) .
• Organic growth accelerated to 9%, above the high end of Q1 guidance (5.5–7.5%) and supported by strong Electrical and Aerospace backlogs; total book-to-bill at 1.1 on a rolling 12-month basis .
• Guidance shifts: FY 2025 organic growth raised to 7.5–9.5% (from 7–9%), segment margin lowered to 24.0–24.4% (from 24.4–24.8%), GAAP EPS reduced to $10.29–$10.69 (from $10.60–$11.00), adjusted EPS reaffirmed at $11.80–$12.20 .
• Key catalysts: continued AI/data center demand, raised Electrical Americas growth outlook, and tariff mitigation actions; near-term margin friction from tariffs expected, with dollar-for-dollar recovery targeted through cost, supply chain, and pricing actions .

What Went Well and What Went Wrong

• What Went Well

  • Electrical Americas strength: sales $3.010B (+12% YoY), operating profit $904M (+15% YoY), and record 30.0% margin (+80 bps YoY) .
  • Aerospace momentum: record sales $979M (+12% YoY), backlog +16% YoY, and 23.1% margin; book-to-bill 1.1 .
  • Management confidence on secular demand: “We’re confident…prepared to meet that demand with a proven strategy to invest…drive operational excellence and continue our path of growth” .

• What Went Wrong

  • Vehicle weakness: revenue down 15% YoY (organic −11%, FX −4%), margin 15.5%
  • Tariff headwinds: FY segment margin guide cut by 40 bps; management expects pricing/cost actions to offset dollar-for-dollar, but not full margin recovery in 2025 .
  • eMobility launch costs: $162M sales (+2% YoY) with a −$4M operating loss due to ramp-related expenses .

Financial Results

Headline quarterly trends

Q1 year-over-year comparison

Segment breakdown (Q1 2025)

KPIs and order/backlog indicators

Non-GAAP reconciliation highlights (Q1 2025): adjusted EPS excludes $0.21 amortization, $0.04 restructuring, $0.02 acquisition/divestiture .

Guidance Changes

Management notes tariff assumptions embedded in guidance as of Apr 28, 2025 (Section 301, 232, reciprocal tariffs) .

Earnings Call Themes & Trends

Management Commentary

• Strategy and confidence: “We’re confident…prepared to meet that demand with a proven strategy to invest…drive operational excellence and continue our path of growth” .
• Tariffs playbook: “We will fully compensate for the tariff impact…manage our cost…implement supply chain actions and…pricing…to mitigate on a dollar-by-dollar basis” .
• Data center positioning and Fibrebond: “Fiber Bond is the right asset at the right time…positions Eaton as one-stop shop to rapidly deploy power” ; “Acquiring Fibrebond…is a game-changing move that positions Eaton as a one-stop shop to rapidly deploy power infrastructure” .
• Electrification megaproject pipeline: “42 projects and $169B announced in Q1…long tail of business…Dodge forecasts ~$300B starts in 2025 vs $135B in 2024” .

Q&A Highlights

• AI/data center demand resilience: Management expects orders to remain at high levels; negotiation pipeline +18% QoQ with strength in data centers and industrial; data center content per MW expected to rise with higher rack densities and liquid cooling UPS needs .
• Tariffs and margin impact: Company will offset tariffs dollar-for-dollar via pricing/cost/supply chain; near-term lag creates ~$0.05 EPS headwind in Q2; full margin recovery expected over time, not in 2025 .
• Electrical Americas orders/backlog: Backlog +6% YoY; book-to-bill expected to remain >1; utilities and data centers strong; commercial buildings and transportation pipelines down ~20% .
• Lead times/capacity: Lead times improving 20–25% but not normalized; multiple NA capacity projects underway; capacity fungibility across end-markets cited as strategic advantage .
• Global recovery: APAC mid-teens and EMEA low double-digit organic growth; restructuring savings weighted to 2H for Electrical Global .

Estimates Context

Q1 2025 actuals vs Wall Street consensus (S&P Global):

Values retrieved from S&P Global.*

Interpretation: Revenue and EPS modestly beat consensus; EBITDA slightly missed, consistent with tariff-related margin friction and launch costs in eMobility .

Key Takeaways for Investors

• Strong secular demand in electrification/AI keeps orders and backlog elevated; Electrical Americas and Aerospace are the growth engines, while Vehicle remains a drag .
• Guidance mix shift is pivotal: organic growth raised, but margins/EPS trimmed due to tariffs; management’s pricing/cost/supply chain playbook aims to offset dollar-for-dollar, with margin normalization expected over time .
• Data center exposure is deepening; Fibrebond expands modular capability, and negotiation pipelines are accelerating—supporting volume-driven growth through 2025 and beyond .
• Regional recovery adds breadth: EMEA/APAC orders inflecting and Global segment margins targeted for improvement with restructuring benefits weighted to 2H .
• Near-term trading setup: modest beat on revenue/EPS vs consensus, raised top-line guide, but lower margin/EPS guides due to tariffs; watch pricing realization cadence and Q2 EPS lag (~$0.05 headwind) .
• Cash discipline intact: Operating cash flow $238M and FCF $91M amid inventory builds to hedge tariffs; dividend of $1.04/share payable May 23, 2025 reinforces capital return .
• Monitor execution in eMobility and Vehicle; launch costs and weaker ICE trends weigh, but electrical content per MW in AI data centers should offset with higher mixed-margin opportunities .

Additional Relevant Press Releases (Q1 context)

• Dividend declaration: $1.04 per share, payable May 23, 2025 .
• Fibrebond acquisition completed: $1.4B purchase; ~$378M TTM revenue; ~$$110M est. 2025 adjusted EBITDA; EPS neutral in 2025 .
• Aerospace capacity expansion: $18.5M investment in Orchard Park, NY; +50k sq. ft. and +77 jobs to meet defense demand .